Media Myth

Gassing Up
Networks Warn about $4, $5 or $6 Gasoline.
Maybe one day they’ll be right.

By Dan Gainor
The Boone Pickens Free Market Fellow

Executive Summary

     Gas prices have again passed $3 a gallon. But Americans should be used to high prices by now – the mainstream media have been warning them of $4, $5 and even $6 a gallon for more than two years. According to a May 7, 2007, CNN poll, “more than three quarters of Americans” think they'll have to pay more than $4 a gallon this year. It’s no wonder. The media have been telling viewers that for years.

     Some key points:

• High-Priced Hype: ABC, CBS and NBC have done at least 70 stories that mentioned $4-a-gallon gas or higher since Jan. 1, 2005. The national average for regular has never gone above $3.06 in that time.
• Failed Predictions: Journalists and experts relied on predictions of gas prices hitting at least $4 a gallon to make their case. One ABC report said $7 per gallon was coming. Regular unleaded gas has barely passed $3 … ever.
• ABC the Worst: Although it did the fewest stories, ABC had the most outlandish comments of any network. Those included three separate mentions of $6 or higher gas. Forty percent of the network’s mentions of high-priced gas were about $5 per gallon or more.
• CBS the Best: Despite its typical economic gloom-and-doom, CBS served its audience by providing balance, not hype, in more than one-fourth of its stories.
   

      If you want to drive faster, you hit the gas. Network news shows that want higher ratings do the same thing, except they hit gas prices.

      Now that gasoline has topped $3 nationally for 2007, the networks are again warning about prices that could reach at least $4 a gallon. NBC’s Meredith Vieira complained about “gas pains” during the May 3, 2007, show. “Why you could be paying $4 a gallon when you hit the road this summer,” she teased.

      Such warnings are nothing new. Since Jan. 1, 2005, ABC, CBS and NBC have mentioned prices that high in at least 70 stories. Network evening and morning show stories hyped the high prices in high-tax, high-regulation states like California. They also relied on expressions like “approaching,” “closing in on,” “bumping up against” and “just around the corner” to indicate $4 gas was on the way.

      But $4 a gallon never happened. It never even came close. Despite all the network hype, the average national price for a gallon of regular gas topped out at $3.06 on Sept. 5, 2005, after Hurricane Katrina took a toll on the nation’s distribution system. And that’s still 16 cents below the number economists would use – the inflation-adjusted record high of $3.22 from March 1981.

      As far back as two years ago, NBC was talking about $5 gasoline. On the May 20, 2005, “Today,” reporter Carl Quintanilla asked the audience to picture a scary future. “Imagine a world with $5 gasoline. What would you do?” he asked.

      Quintanilla then went on to interview New York Times columnist Thomas Friedman, who actually advocates for higher gas prices. According to the story, Friedman “says raising gas prices to $4 through taxes is exactly the kick in the pants America needs.”

      Journalists kept kicking. From Jan. 1, 2005, through May 8, 2007, major news events were consistent opportunities for reporters to caution about $4-a-gallon or higher gas prices. Reporters underlined the danger of hurricanes, Mideast war and terrorism, along with U.S. regulatory roadblocks and refinery fires.

      When Iran kidnapped 15 British sailors and marines, CBS’s Anthony Mason warned of a potential cataclysm. If Iran shut the Straits of Hormuz, Mason said, energy prices could spike. “In a heartbeat, oil could hit $100 a barrel. Imagine gas at $5 a gallon,” he predicted on the March 30, 2007, “Evening News.”

      Iran announced the 15 would be freed just days later. Gas prices had increased about four cents in that time.

      It was one of many predictions that turned out wrong.

      The Jan. 21, 2006, “NBC Nightly News” brought on oil expert John Kilduff, who said high oil prices could be destructive. “I think $70 per barrel could prove to be the breaking point for the economy,” he warned.

      Reporter Rosalind Jordan responded by piling another incorrect claim on top of that one. “Meaning gasoline $4 to $5 a gallon, heating oil and jet fuel just as expensive,” she said.

      Oil prices went above $78 a barrel in August 2006 and the economy continued to flourish. Gas prices hit $3.04 that month. Both the “expert” prediction and the journalistic claim were quite wrong.

      All the media speculation served as a backdrop to more anti-business rhetoric in Washington. U.S. Rep. Dennis Kucinich (D-Ohio), chairman of the Domestic Policy Subcommittee, said he will conduct a hearing June 7 into why gasoline prices are more than $3 per gallon, according to the May 5, 2007, Cleveland Plain Dealer.


$4 Is Just a Start

      Why worry about $4 a gallon when the networks warned gas prices will even go higher than that? At least 20 times since Jan. 1, 2005, the big three networks mentioned prices hitting $5, and another six times for $6 or higher.

      Gas prices became a common network component of bad news. A May 8, 2007, “Good Morning America” story linked the possibility of $4 gas to a stock market crash. Host Diane Sawyer dwelled on the dangerous combination. “Will runaway gas prices keep soaring, and did you know that the stock market has hit a milestone reminiscent of what happened before the big crash?” she asked.

      ABC financial expert Mellody Hobson responded by trying to calm Sawyer and explain that while $4 gas would be expensive, she didn’t expect it to happen in 2007. “But before anyone panics, I would say, calm down. We've had a one-time case of bad luck here, even with the wild card of the Middle East out there. I would suspect things will settle down from here,” said Hobson.

      Even Hobson, of Ariel Capital Management, fell victim to doomsaying in one earlier story. Normally the network’s gold standard for economic reporting, she used her May 1, 2006, appearance on “Good Morning America,” to claim outlandish foreign gas prices might be in America’s future.

      Sawyer said Americans can “console ourselves” with the high cost of overseas gasoline. Hobson responded by saying those would become the norm. “Those prices are astronomical. And I actually think that’s where we’re headed. Netherlands – Netherlands $7 per gallon at the pump.”

      The average price of a gallon of gas that day was $2.92. Hobson’s choice was to predict an increase of $4.08 – an increase of 140 percent. She also said she thought $3 was going to become the “floor” for gas prices instead of the “ceiling.”

      When ABC warned about a possible terror plan to target America’s oil supply, what stood out was the huge potential increase in price. The Jan. 8, 2007, “World News with Charles Gibson” was introduced by Gibson who told viewers ominously, “A militant network targeting America’s oil supply and triggering fears of $6 a gallon gas.”

      Susan McGinnis of the CBS’s “The Early Show” showed superheated hype is the name of the game by invoking the worst images from previous gas crises. After mentioning “$4 a gallon gas could easily be on the horizon,” McGinnis’s July 13, 2006, appearance added several other worries to the mix.

      “And there’s talk of shortages,” she said. “It’s reviving memories of drivers racing out of gas stations without paying, drivers using locking gas caps, investigations into price fixing, and this week we have word of regular gas being passed off as premium – all a result of these painful price hikes.”

      High gas prices figured prominently in good news stories as well as bad ones. It didn’t matter if the stock market went up, gas prices went down or global tensions eased; network journalists found some way to talk about the threat from expensive fill-ups.

      When gas prices declined, ABC naturally warned of their going up – to $4 a gallon. During the Oct. 11, 2006, “Good Morning America,” host Diane Sawyer mentioned the price had dropped and “that’s the ninth straight week that prices have gone down.”

      While the story detailed the price decline, it wasn’t how reporter Dan Harris ended his piece. “But, and there’s always a but when it comes to gas prices, this could all change if winter is harsh, if Mideast tensions flare once again, or if the oil producing countries get their act together and seriously cut back on production.”

      In other words, the good news of lower gas prices could go bad any minute.

      That was the same strategy deployed by CBS’s Anthony Mason. In a July 13, 2006, “Evening News,” story, he claimed the market for oil is never good, even when peace breaks out. “Even if political tensions ease, analysts say, gas prices are likely to get worse before they get better.”

      They did get worse – just not by much. Prices rose a mere 8 cents before dropping like a stone.


A TV Camera or a Crystal Ball?

      News typically focuses on current events, but not with gas prices. Journalists trot out experts who predict what might or might not happen to oil or gas prices. And when that doesn’t work, the reporters go into the fortune-telling business themselves. The 70 stories in this study included at least 52 references to high gas prices that might someday occur.

      Not one of the national predictions came true.

Journalists sometimes hedged their bets by careful phrasing. “News” reports were filled with the terms “if,” “maybe” and “could” to describe the potential price for a gallon of regular.

      Reporters relied on “analysts” or “some analysts” to caution about the most devastating price hikes. CBS’s Rene Syler relied on those “analysts” to predict a huge increase in prices during the May 3, 2006, “Early Show.”

      “Oil prices are spiking again. This morning, sweet crude was nearing record highs trading for $74.87 a barrel,” she explained. “But some analysts predict much higher prices by winter, and that could push gasoline prices to $5 a gallon.”

      Ann Curry of NBC’s “Today” showed the concept wasn’t confined to CBS. Her Sept. 23, 2005, story detailed the damage from Hurricanes Katrina and Rita. “At least one analyst predicts that gas prices could hit $4 a gallon within two weeks,” she said. Within two weeks, national gas prices had gone from $2.75, when Curry made her comment, to $2.94 and were already dropping again.

      NBC’s Anne Thompson also relied on those “analysts” for her gloomy July 14, 2006, “Nightly News” report. “If you think $3 gas is bad, what about four? Analysts say it could be just around the corner because of the fighting in the Middle East.”

      She drew support from expert Phil Flynn, an Alaron oil analyst. “If it goes bad, we could be talking 4, 4.50, maybe even $5,” he said. If that wasn’t scary enough, Thompson ended her report with more worries. “All this on fear, without a hurricane or other major event that really squeezes the world’s oil supply.”

      NBC had even worse luck with expert John Kilduff, of the brokerage FEMAT USA. Kilduff made an April 23, 2006, “Nightly News” prediction that didn’t even come close to being accurate. “Gasoline prices are going to continue to soar well over $3 a gallon on the national average. More unfortunate folks will be paying upwards of 3.50, 4 and maybe even $5 a gallon as we hit into mid-June and early July.”

      Gas soared nationwide to $3.04 at its 2006 peak.

      Many of the bad predictions relied on incorrect assumptions about oil prices.

      A July 16, 2006, report showed oil trader Eric Bolling warning that war in the Mideast could lead to “$100 [per] barrel” for oil. CBS Reporter Anthony Mason followed that “Sunday Morning” comment with this claim: “That would push the price at the pump well over $4 a gallon.”

      Neither came true. Oil topped out at $78.64 in early August and gasoline barely passed $3 nationwide.

      The networks saw horrible weather impacts on gas prices in the future as well. NBC’s Tom Costello told the July 7, 2006, “Nightly News” audience that hurricanes could easily raise gas prices, which were already expected to increase because of seasonal demands.

      “Now predictions that prices could jump another 25 cents by Labor Day unless another hurricane slams Gulf Coast refineries already running at 94-percent capacity,” he said. But then he turned to another oil “expert” who said that would mean a price of $4 a gallon instead.

      At the time of that report, gas prices were at $2.94. They didn’t go up even the 25 cents predicted. They hit $3.04 in early August before dropping to $2.14.


All Fuel Costs Are Local

      Journalists talked about gas prices actually hitting at least $4 per gallon about one-fourth of the time (19 out of 71 mentions). That was probably because that happened only locally in places like California, New York and Hawaii, the top three gas tax states according to the American Petroleum Institute.

      Julie Chen, like many reporters, emphasized the high prices, not the low. “Hurricane Katrina has sent gas prices way up … In Georgia, it’s almost $6,” she said on the Sept. 1, 2005, “Early Show.” ABC’s Dean Reynolds explained how “Chicago inched closer to $4 a gallon” during “World News Tonight” one day earlier.

      But few states could say they received as much gas price attention as California.

      CBS’s May 25, 2006, “Early Show” was a perfect example. The broadcast cited a report from the Foundation for Taxpayer & Consumer Rights (FTCR) claiming “$4 or $5 a gallon by this summer,” “could happen in California.” The story neglected to mention that California ranked third-highest among the states for gas taxes – at 58.6 cents a gallon, more than 13 cents higher than the national average.

     The story relied on input from FTCR, a group that battles “Big Business.” FTCR has since launched a new Web site specifically targeting oil companies called www.oilwatchdog.org that, among other attacks on the industry, complains about “outrageous oil company profits.”

     Reporter Sandra Hughes didn’t explain much about California’s excessive fuel regulations. According to the Energy Information Administration, “the State of California operates its own reformulated gasoline program with more stringent requirements than Federally-mandated clean gasolines.” EIA makes it clear that, because of these rules, even small disruptions in supply can cause prices to spike.

      The California theme was common when reporters wanted to show $4 gas was already a fact. NBC’s Andrea Mitchell picked some of the highest priced gas in the nation for her March 31, 2007, story. “In San Francisco, gasoline was bumping up against $4 a gallon for regular,” she said on “Saturday Today.” The report made no mention of the nationwide price, which was about $2.66 – that’s $1.34 lower than Mitchell’s report.

      NBC’s Lisa Daniels found a similar example – a woman who commuted to Washington, D.C., 55 miles one way. That “Nightly News” piece claimed the woman’s “plan to save money has backfired.”

      Daniels depicted the woman’s new money problems, commuting all the way from a Baltimore suburb. While she explained about gas prices, Daniels ignored the fact that Baltimore’s cost of living is 16.67 percent lower than D.C.’s, according to Bankrate.com. Then the April 29, 2006, report added it would get worse and that “some experts are predicting 4, even $5 a gallon within the next six months.”


There Was Some Good News

      Not all the reporting was bad. On ABC’s “World News Tonight” April 23, 2006, reporter Brian Rooney noted that “California’s specially formulated gasoline costs 10 or 15 cents more a gallon. And then, there’s tax, 50 cents a gallon.” Rooney added, “States with the highest taxes tend to have the highest gas prices.”

      Rooney’s bit of truth about taxes seldom appeared in news reports. According to the American Petroleum Institute, the average tax on a gallon of gas is 45.8 cents. States like California, New York and Hawaii have tax rates at least 25 percent higher.

      CBS outdid both ABC and NBC by relying on the more rational assessment of Tom Kloza from the Oil Price Information Service. While many experts were predicting $4, $5 or even $6 a gallon, Kloza was going the opposite direction.

      The April 25, 2006, “Early Show” was one ideal example. When Kloza was asked about $4 or $5 gas by reporter Sharyl Atkisson, he called it “a lot of fearmongering.” “I think you could see 4 to $5 a gallon if you bring your car back to the car rental without filling it up or if you’re looking at a couple of rogue stations in places like Rodeo Drive or Palm Beach or whatever.”

      CBS used Kloza in roughly one-fourth of all stories about $4-a-gallon or higher priced gas (6 out of 26). Julie Chen of “The Early Show” called him “an optimist,” but he was more of a realist. Kloza was consistently proven correct by events.

      On May 2, 2007, he told the “The Early Show” that he didn’t think gas prices would hit $4 in 2007. “I don't think it's a stepping stone up to 3.50 or $4 or some of the apocalyptic numbers you hear,” he explained.


Conclusion

      Gas prices are cyclical. High demand, lack of new refineries, high regulation and higher taxes all contribute to rising prices. But that doesn’t excuse the hype and the seemingly endless stream of journalistic predictions. Gas prices had journalists chomping at the bit while they were going up and caring little when they came down.

      Former “CBS Evening News” anchor Bob Schieffer summed up much of what was wrong in the network reporting on high gas prices. In an Aug. 30, 2006, account, he managed to downplay the good news of declining prices and predict an ongoing problem. “Whatever the short-term prospects for gas prices, though, over the long haul, it is clear the days of cheap gas are over,” he claimed.

      After Schieffer’s comment, gas prices dropped every business day until mid-October.